Index for Annual Financial Statements

Transcription

1 Index for Annual Financial Statements STATEMENT OF RESPONSIBILITY 31 REPORT OF THE ACCOUNTING AUTHORITY STATEMENT OF FINANCIAL PERFORMANCE 37 STATEMENT OF FINANCIAL POSITION 38 STATEMENT OF CHANGES IN NET ASSETS 39 CASH FLOW STATEMENT 40 ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2 Statement of Responsibility by the CTFL SETA Council Statement of Responsibility by the CTFL SETA Council for the period ending 31 March 2011 It is the CTFL SETA Council s responsibility to oversee the preparation of the SETA s Annual Financial Statements and to ensure that the Annual Financial Statements fairly present the SETA s financial position at 31 March 2011 and the financial transactions conducted during the period under review. The Annual Financial Statements have been prepared in accordance with the Statement of Generally Accepted Accounting Practice (GAAP) and Generally Recognised Accounting Practice (GRAP) as prescribed in the Treasury Regulations and the Public Finance Management Act, 1999 (Act No 1 of 1999) and relevant guidelines issued by the National Treasury. During the period under review the activities and conduct of Council, Committee and staff members were governed by approved policies and procedures and conducted within the set parameters. The main objective of the CTFL SETA remained the implementation of sector and national skills development priorities in the CTFL sector. The Council regularly evaluated the policies and procedures to ensure alignment with good corporate governance principles. The implementation of the policies and procedures were continuously monitored to ensure ethical conduct, fair practice and sound financial management across all governance structures and SETA departments. Regular internal audits were conducted to keep the Council informed of any risks and to monitor compliance. The CTFL SETA Council is confident that the financial management of the CTFL SETA has been conducted in accordance with the SETA Financial Policies and Procedures that comply with the Public Finance Management Act, 1999 (Act No 1 of 1999). Although the CTFL SETA will be amalgamated with Forestry SETA (FIETA) and the Publishing, Printing and Packaging sectors of MAPPP SETA with effect from 1 April 2011, the Council deems the CTFL SETA to be a going concern in the following financial year as part of the new FP&M SETA structure and operations and therefore adopts the going concern basis in preparing the Annual Financial Statements. The current license period for the CTFL SETA expired on 31 March The CTFL SETA Council is not aware of any matters or circumstances arising since the end of the financial year not otherwise dealt with in the Annual Financial Statements, which will have a significant effect on the operations or financial position of the SETA. The CTFL SETA Annual Financial Statements for the year ending 31 March 2011 as set out on page 32 to 64 were approved by the CTFL SETA Council on 27 May 2011 and signed on its behalf by: ABIEDA ABRAHAMS Chairperson PK NAICKER Chief Executive Officer 31

3 Report of the Accounting Authority of the CTFL SETA Report of the Accounting Authority of the CTFL SETA to the Department of Higher Education and Training and Parliament of the Republic of South Africa for the year ended 31 March 2011 The Clothing, Textiles, Footwear and Leather Sector Education and Training Authority (CTFL SETA) has been established in terms of Section 9(1) of the Skills Development Act, 1998 (Act No 97 of 1998) as amended, as a Sector Education and Training Authority with effect from 1 April 2000 to March It was re-established by the Minister of Labour for the period April 2005 March 2010 in March The Minister of Higher Education and Training has in terms of Notice 52 of 2010, published in Government Gazette No of 5 February 2010, extended the period of establishment of all SETAs to 31 March Business Address 3rd Floor, Umdoni Centre, 28 Crompton Street, Pinetown, 3601 or PO Box 935, Pinetown, The CTFL SETA is governed by: 1. Section 9 of the Skills Development Act, 1998 (Act No 97 of 1998) as amended; 2. Skills Development Amendment Act, 2008 (Act No 37 of 2008); 3. The South African Qualifications Authority Act, 1995 (Act No 58 of 1995); 4. The Skills Development Levies Act, 1999 (Act No 09 of 1999); 5. The Public Finance Management Act, 1999 (Act No 01 of 1999) as amended; 6. Treasury Regulations for departments, constitutional institutions and public entities; and 7. The Preferential Procurement Policy Framework Act, 2000 (Act No 05 of 2000) General review of the state of financial affairs The total income received by the SETA comprised R61 million which was 3% higher than the amount of R59 million received in 2009/10. Administration expenses exceeded the legislative provision of 10% levy income received by 0,9%. The CTFL SETA requested permission from the DHET to exceed the provision. Mandatory grants amounting to 77% (2009/10 : 80%) of total mandatory levy income were paid to large, medium and small firms in the sector during the year. Discretionary grant expenses increased by 40% and totalled R28 million (2009/10 : R20 million) for the period under review. Total reserves in the Statement of Financial Position amounted to R57 million (2009/10 : R49 million) of which R37,000 has been set aside in the administration reserve. R102,000 has been set-aside for new firms that joined the SETA after the cut-off date for WSP submissions. R57,3 million (2009/10 : R48,7 million) of discretionary reserves has been allocated (R56,2 million already contractually committed) to various discretionary projects. Services rendered by the CTFL SETA Promote the concepts of strategic planning for training, linked to company workplace skills plans. Develop and implement an effective and efficient Sector Skills Strategy. Promote and register learnerships. Promote high quality technologist level learning for the Sector. Specifically promote skills training and development in small firms through a skills strategy and an implementation plan focused upon their particular needs. Ensure the most effective and efficient disbursement of grants from the skills development levies to the sector. Provide an efficient accreditation and quality assurance service to the sector, via the ETQA process. Develop and strengthen links with provinces, providers, professional bodies and NGOs. Corporate Governance The CTFL SETA Council supports the principle of good corporate governance as contained in the King III report. The SETA professional staff executes their duties in line with SETA policies and procedures and acceptable practices and was assisted by the SETA Council and Committee members in matters where additional expertise is required. 32

4 The CTFL SETA Council and Committees are governed by its Constitution (the term of which was also extended to March 2011). Meetings were conducted in line with the procedures set out in the Constitution and duties were carried out in a fair and responsible manner. The Code of Conduct contained in the Constitution guided the conduct of members of Council, Committees and professional staff and provided an ethical framework for the functioning of the CTFL SETA Council and Committees. Policies and procedures for disclosure of interest and gifts were implemented. The CTFL SETA complied with the relevant laws and regulations of the country as constituted. Risk Management and Fraud Prevention The CTFL SETA has a comprehensive Risk Management Framework in place, which ensured early identification of risk and risk management through the implementation of effective internal controls. Risk assessment exercises were conducted regularly to identify new inherit and external factors that could pose a threat to the organisation. Action plans have been developed and implemented to address perceived risks. A Fraud Prevention Plan is in place to protect the SETA s revenue, expenditure, assets and reputation from attempts by any person to gain financial or other benefit in an unlawful, dishonest or unethical manner. Internal Auditors KZN Treasury, the appointed Internal Auditors of the SETA, has conducted regular internal audits at the SETA s premises. The Internal Auditors attended Audit Committee meetings and reported to the Audit Committee who oversaw the financial management of the SETA to ensure that adequate and consistent financial controls were in place and implemented. The CTFL SETA Audit Committee operated independently from other governance structures (a report from the Chairperson of the Committee is included in this report). Governance Structures The CTFL SETA Council and Committees have been established in line with the CTFL SETA Constitution as approved by the Minister of Labour in September The CTFL SETA Council comprised of 12 employer representatives (four (4) from each sub-sector and regionally representative) and 12 labour representatives (11 from Sactwu and one (1) from Nulaw also regionally representative). The Council, as the Accounting Authority, governed the SETA on a strategic level. The CTFL SETA Council met four (4) times during the period under review. An Executive Committee (Exco), appointed from members of the Council, oversaw operational matters related to the day-to-day functioning of the CTFL SETA. The Exco comprised six (6) employer representatives (two (2) from each sub-sector) and six (6) labour representatives (five (5) from Sactwu and one (1) from Nulaw). The CTFL SETA Exco met twice during the period under review. (See Annexure 1 for an equity profile of Council and Exco members). On 31 March 2011, the CTFL SETA will cease to exist in its current form and the CTFL SETA Council will be responsible to finalise the year-end activities pertaining to CTFL SETA business during the period April July The new FP&M SETA to be established with effect from 1 April 2011, as a result of the amalgamation of CTFL SETA, FIETA and identified sectors of MAPPP SETA, will be governed by an Interim Board and Constitution until September at which time the new FP&M Board will be established. Three (3) Specialist Advisory Committees (SACs) namely - Skills Planning, ETQA and Projects - met regularly during the period under review to discuss issues related to their fields of expertise. An Apprentice Committee oversaw the management and implementation of apprenticeship training in the sector. The SACs gave direction to SETA staff and made recommendations to Council and Exco for consideration. The activities of the SACs were wrapped up in March 2011 and the Committees were dissolved. Remuneration of Accounting Authority and Key Management Constituency representatives served on the SETA governance structures without receiving remuneration. In the case of the Audit Committee (which operated independently from the other structures), the Chairperson of the Audit Committee and individual Audit Committee members who are retired and are serving in their personal capacity and not as firm representatives, received remuneration. 33

5 Report of the Accounting Authority of the CTFL SETA cont. In the period under review, three (3) members of the Audit Committee received remuneration and the total amount paid in this regard was R8,506 (2009/10 : R6,544). Date RP Hirsch RA Kinnear RJ Whiteford Total 21-May-10 R1 145 R1 145 R Jul-10 R1 145 R1 145 R Oct-10 R1 145 R491 R Mar-11 R1 145 R1 145 R2 290 R8 506 The CTFL SETA made most of the flight and accommodation arrangements when members of the Council/Committees were required to travel for SETA meetings and strategic planning workshops. In some cases, members made their own travel arrangements and the SETA reimbursed them or their organisations for these expenses. The total amount paid in this regard was R11,236 (2009/10 : R12,870). Member Date Meeting Amount paid Details Cape Clothing Association January 2011 Amalgamation Task Team R4 945 Refund: Flights and (J Baard) Accommodation Cape Clothing Association October 2011 Strategic Planning Workshop R4 124 Refund: Flights (J Baard, G Choice) M Ngwenya January 2011 Amalgamation Task Team R508 Travel re-imbursement Watson Shoes 19 March 2011 CTFL SETA Council Meeting R1 659 Refund: (R Oosthuizen) Accommodation R The CTFL SETA Staff operated successfully in this year under the guidance of the Council and leadership of key management. The key managers, being the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) have been remunerated on a cost to company basis as follows: Basic 13th Contributions: Leave pay Allowances: Total Total Salary Cheque Pension Fund, Car, 2010/ /10 Medical Aid, Computer UIF, Insurance PK Naicker R R R R R R CEO G Layzell R R R R R R CFO Total 2010/11 R R R R R Total 2009/10 R R R R R The CTFL SETA did not outsource any of its core functions to consultants. Consultants were utilised for specialist services such as payroll and audit consulting services. The total amount paid to consultants was R34,438 (2009/10 : R35,445). 34

6 Safety, health and environmental management policies and practices The Council and management of the SETA remain committed to the protection of all its assets, both human and material, from exposure to risk that could arise from sub-standard practices, procedures or conditions. This is managed through the implementation of comprehensive health (including HIV Aids), safety and security policies and procedures, the training and education of staff to prevent exposure to risk and the maintenance of procedures to ensure the safety of staff and assets. Social investment prioritisation and spending The CTFL SETA Supply Chain Management Policies and Procedures encompass the maintenance of good corporate governance through compliance to the relevant legislation and regulations, the promotion of procurement from BEE and SMME suppliers, the application of procurement to achieve the strategic objectives as stipulated in the strategic plan and the SSP and ensuring value for money when procuring goods and services. Human capital development The CTFL SETA committed itself to the implementation of employment equity, the elimination of unfair discrimination and the creation of a diverse team in line with the demographic realities of South Africa. This was achieved by recruiting, training, developing and accelerating the promotional opportunities of employees from designated groups. The senior management ensured equal employment opportunity and supported affirmative action objectives. The CTFL SETA established an Employment Equity Steering Committee, representative of all groupings, to address issues pertaining to employment equity. A Skills Development Committee analyzed the skills development needs of the organisation and individual staff members and developed a workplace skills plan to align and address the needs effectively. The Skills Development Committee was responsible for the submission of the SETA s mandatory grant application to ETDP SETA. The CTFL SETA has successfully accessed mandatory and discretionary grants during the period under review. A detailed report on Human Resources has been included as Annexure 2 on pages 66 to 69. Discontinued Activities and New Projects Projects that were successfully concluded during 2010/11 Description Actual Beneficiaries Conducted in conjunction with: Work Study Project 20 learners DUT Aranda: NQF Level 1 Project 2 25 learners Aranda Learnership College SACTWU Edupeg Project pupils SACTWU Continuous Professional Development Project 22 learners KZN DEDT DUT: Pattern Making Short Course 18 learners DUT Work Experience: Stellenbosch Master Students 8 students Stellenbosch University New projects/activities to commence in 2011/12 Description Planned Beneficiaries Planned in conjunction with: Cape Clothing Association: Misconduct Workshops 50 participants Cape Clothing Association Aranda: NQF Level 1 Project 3 30 learners Aranda Learnership College SACTWU Edupeg Project schools SACTWU Work Experience: Stellenbosch Master Students 8 students Stellenbosch University New venture Creation Project 20 learners Western Cape Learnership College Team Leader Development Project 20 learners Western Cape Learnership College TUL Seminar Series participants KZNDEDT/FP&M SETA Continuous Professional Development Project 30 learners KZNDEDT/FP&M SETA Women in Leadership All stakeholders SACTWU Fashion Festival All stakeholders SACTWU Enhancing Shop Stewards Skills 1000 shop stewards SACTWU 35

7 Report of the Accounting Authority of the CTFL SETA cont. Continuing Projects Description Description Actual Beneficiaries Planned in conjunction with: New Venture Management Project 48 learners DUT Footwear Occupational Qualification Pilot Project 34 learners/all Footwear SAFLIA companies Training Layoff Scheme Projects that were successfully concluded during 2010/11 Description Actual Beneficiaries Conducted in conjunction with: Mario Levi 61 employees UIF/W&R SETA Trubok 834 employees UIF/W&R SETA Stroud Riley 33 employees UIF/W&R SETA Traffic Clothing 7 employees UIF/W&R SETA Gemtex 40 employees UIF/W&R SETA Training Layoff Scheme Continuing Projects Description Actual Beneficiaries Conducted in conjunction with: Beaches Clothing 38 employees UIF/W&R SETA Aranda Textiles 126 employees UIF/W&R SETA Performance Information The CTFL SETA has made grants, bursaries and skills development support available to firms in the CTFL sector in line with its Strategic Plan and in an effort to reach its agreed upon targets. A detailed report on the CTFL SETA s performance against NSDS II targets have been included on pages 14 to 25. Amalgamation Process The amalgamation process of the CTFL SETA with FIETA and the PPP sub-sectors of MAPPP SETA has commenced and an Amalgamation Task Team, comprising organised business and labour representatives, representatives from the DHET and legal council has been engaged in intensive discussions since the Minister s announcement of the new SETA landscape in November The first order of business was the signing of a Memorandum of Understanding between the sub-sectors containing the principles guiding the amalgamation process, an outline of activities to be addressed and timelines for implementation/finalisation. One of the first activities of the Amalgamation Task Team was to develop a constitution for the FP&M SETA. An Interim Constitution was signed on 28 March 2011, giving effect to the appointment of an Interim Board to govern the FP&M SETA for the period April September The Minister of Higher Education and Training issued a certificate of establishment for the FP&M SETA on 31 March The FP&M SETA will be fully operational with effect from 1 April Events after reporting date The CTFL SETA s license has expired on 31 March 2011 and all business relating to the CTFL SETA as a legal entity will be wrapped up after the year-end process has been completed. All assets of the CTFL SETA (including human resources) have been transferred to the FP&M SETA and all business will be conducted under the auspices of the FP&M SETA with effect from 1 April SCOPA resolutions None. 36

8 Annual Financial Statements STATEMENT OF FINANCIAL PERFORMANCE for the year ended 31 March / /10 Notes R'000 R'000 Actual Actual REVENUE Non Exchange Skills Development Levy Revenue Non Exchange Skills Development Levy Revenue: Penalties and Interest Kwazulu Natal Department of Economic development and tourism: Special project W&R SETA joint collaboration project Training layoff scheme UIF Training layoff scheme W&R SETA Investment income Other Revenue Total revenue EXPENSES Employer grant and project expenses 5 (49 047) (48 578) Administration expenses 6 (8 362) (7 798) KwaZulu-Natal Department of Economic development and tourism: 15 (2 146) (957) Special project W&R SETA joint collaboration project Funds expensed 16 (3 372) (7) Training layoff scheme UIF 17 (51) Training layoff scheme W&R SETA 18 (2 132) Total expenses (65 110) (57 340) NET SURPLUS/(DEFICIT) FOR THE PERIOD

9 Annual Financial Statements cont. STATEMENT OF FINANCIAL POSITION as at 31 March 2011 ASSETS Non-current assets 2010/ /10 Notes R'000 R'000 Property, plant and equipment Intangible Assets Current assets Receivables from non-exchange transactions Receivables from exchange transactions Inventories Cash and cash equivalents TOTAL ASSETS LIABILITIES Current liabilities Trade and Other Payables non-exchange transactions Trade and Other Payables exchange transactions Kwazulu Natal Department of Economic development and tourism: Special project received in advance W&R SETA funds received in advance Training layoff scheme UIF funds received in advance Training layoff scheme W&R funds received in advance Total Liabilities NET ASSETS NET ASSETS Administration reserve Employer grant reserve Discretionary reserve TOTAL NET ASSETS AND LIABILITIES

10 STATEMENT OF CHANGES IN NET ASSETS for the year ended 31 March 2011 Notes Administration Employer grant Discretionary Unappropriated reserve reserve reserve surplus Total R'000 R'000 R'000 R'000 R'000 Balance at 31 March Restated balance Net surplus per Statement of Financial performance Allocation of unappropriated surplus 1 (418) (3) (7 040) Excess reserves transferred 316 (7699) to Discretionary reserve Balance at 31 March Net surplus per Statement of Financial performance Allocation of unappropriated surplus 1 (725) (8 575) Excess reserves transferred 626 (8 906) to Discretionary reserve Balance at 31 March

11 Annual Financial Statements cont. CASH FLOW STATEMENT for the year ended 31 March / /10 Notes R'000 R'000 CASH FLOWS FROM OPERATING ACTIVITIES Operating activities Cash receipts from stakeholders Levies, interest and penalties received Other cash receipts from stakeholders Cash paid to stakeholders, suppliers and employees (54 897) (59 294) Grants and project payments (39 756) (51 544) Special projects (7 701) (964) Compensation of employees 6.1 (4 442) (4 179) Payments to suppliers and other (2 998) (2 607) Cash generated from operations Investment income Movement on reserves Net cash outflow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and Intangibles 7 & 8 (60) (19) Proceeds from disposal of property, plant and equipment 7 6 Net cash (outflow) from investing activities (54) (19) Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

12 ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 31 March Basis of preparation The annual financial statements have been prepared on a going concern and on the historical basis unless otherwise stated in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board and the Public Finance Management Act (PFMA), 1999 (Act No. 1 of 1999). Standard of GRAP GRAP 1: Presentation of annual financial statements GRAP 2: Cash flow statements GRAP 3: Accounting policies, changes in accounting estimates and errors GRAP 4: Effects of changes in Foreign Exchange Rates GRAP 5: Borrowing Costs GRAP 9: Revenue from Exchange Transactions GRAP 12: Inventories GRAP 13: Leases GRAP 14: Events after the Reporting Date GRAP 17: Property Plant and Equipment GRAP 19: Provisions, Contingent Liabilities and Contingent Assets GRAP 100: Non-current Assets held for sale and Discontinued Operations GRAP 102: Intangible assets 1.1 The cash flow statement can only be prepared in accordance with the direct method. 1.2 Specific information has been presented separately on the statement of financial position such as: (a) receivables from non-exchange transactions, including taxes and transfers; (b) taxes and transfers payable; (c) trade and other payables from non-exchange transactions 1.3. Amount and nature of any restrictions on cash balances is required. The principal accounting policies adopted in the preparation of the annual financial statements are set out below and are, in all material respects, consistent with those of the previous year, except as otherwise indicated. 2. Currency The annual financial statements are presented in South African Rands since that is the currency in which the majority of the entity transactions are denominated. 3. Revenue recognition Revenue is recognised when it is probable that future economic benefits will flow to the enterprise and these benefits can be reliably measured. 3.1 Levy income In terms of section 3(1) and 3(4) of the Skills Development Levies Act, 1999 (Act No. 9 of 1999), registered member companies of the SETA pay a skills development levy of 1% of the total payroll cost to the South African Revenue Services (SARS). 80% of skills development levies are paid over to the SETA (net of the 20% contribution to the National Skills Fund). Levy income is recognised on the accrual basis in the SETA s financials. 41

13 Annual Financial Statements cont. The SETA refunds amounts to employers in the form of grants, based on information from SARS. Where SARS retrospectively amends the information on levies collected it may result in grants that have been paid to certain employers that are in excess of the amount the SETA is permitted to have granted to employers. A receivable relating to the overpayment to the employer in earlier periods is raised at the amount of such grant over payment, net of bad debts and provision for irrecoverable amounts. Revenue is adjusted for Inter SETA transfers due to employers changing SETA's. Such adjustments are separately disclosed as Inter SETA transfers. The amount of the Inter SETA adjustment is calculated according to the Standard Operating Procedures issued by the Department of Higher Education & Training (DHET) on 15 May When a new employer is transferred to the SETA, the levies transferred by the former SETA are recognised as revenue and allocated to the respective category to maintain its original identity. The SDL transfer is measured at the fair value of the consideration received. Skills Development Levy (SDL) income is recognized when it is probable that future economic benefits will flow to the SETA and these benefits can be measured reliably. This occurs when the Department of Higher Education & Training (DHET) either makes an allocation or payment, whichever comes first, to the SETA, as required by section 8 of the Skills Development Levies Act, 1999 (Act No. 9 of 1999). 3.2 Interest and penalties Interest and penalties on the skills development levy is recognised on the earlier of the time the Department of Higher Education & Training (DHET) makes the allocation or payment of the funds in the bank account of the SETA. 3.3 Funds allocated for SPECIAL PROJECTS Funds transferred to the SETA on all special projects are accounted for in the Annual Financial Statements of the SETA as a liability until the related eligible special projects expenses are incurred, when the liability is extinguished and revenue recognised. 3.4 Government grants and other donor income Conditional government grants and other conditional donor funding received are recorded as deferred income when they become receivable and are then recognised as income on a systematic basis over the period necessary to match the grants with the related costs which they are intended to compensate. Unconditional grants received are recognised when the amounts have been received. 3.5 Investment income Interest income is accrued on a time proportion basis, taking into account the principal outstanding and the effective interest rate over the period to maturity. 4. Grants and project expenditure A registered company may recover its total levy payment by complying with the grant criteria in accordance with the Skills Development Regulations issued in terms of the Skills Development Act 1999 (Act No 9 of 1999). Mandatory grants The grant payable and the related expenditure are recognised when the employer has submitted an application for a grant in the prescribed form within the agreed upon cut-off period and the application has been approved as the payment then becomes probable. The grant is equivalent to 50% (2009/10 : 50%) of the total levies paid by the employer during the corresponding financial period for the skills grant respectively. Discretionary grants A SETA may out of any surplus monies determine and allocate discretionary grants to employers, education and training providers and workers of the employers who have submitted an application for a discretionary grant in the prescribed form within the agreed upon cut-off period. The grant payable and the related expenditure are recognised when the application has been approved to the extent that the conditions of the grant have been met. 42

14 Project expenditure Project expenditure comprises: costs that relate directly to the specific contract; costs that are attributable to contract activity in general and can be allocated to the project; and such other costs as are specifically chargeable to the SETA under the terms of the contract. Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. Project costs are recognised as expenses in the period in which they are incurred and to the extent that conditions are met. A receivable is recognised net of a provision for irrecoverable amounts for incentive and other payments made to the extent of expenses not yet incurred in terms of the contract. 5. Commitments Commitments are disclosed where the SETA has in the normal course of its operations, entered into a contractual agreement with entities either related to discretionary grants or project expenses which have not yet become due for payment. 6. Irregular and fruitless and wasteful expenditure Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of any applicable legislation, including: The PFMA, The Skills Development Act, Skills Development Levies Act Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. All irregular and fruitless and wasteful expenditure is charged against income in the period in which it is incurred. 7. Property, plant and equipment Property, plant and equipment are stated at historical cost less any subsequent accumulated depreciation and adjusted for any impairment. An impairment, residual and useful life review is done annually. The cost model is used as the basis of measurement after initial recognition of the asset. Depreciation is calculated on the straight-line method to write off the cost of each asset to estimated residual value over its estimated useful life as follows: Computer equipment 20% 33% Office furniture and fittings 20% 33% Office equipment 20% 33% The estimated useful life of the assets are limited to the remaining period of the licence issued to the SETA by the Minister of Labour. For the current year the remaining period is 0 year (2009/10 : 1 year). Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. 8. Intangible assets Computer Software and Licences Acquired computer software and licences are carried at cost less any accumulated amortisation and any impairment losses. Amortisation on these costs is provided to write down the intangible assets, on a straight-line basis, over their useful life. Software End of CTFL SETA licence 2011 Licence Term of licence 43

15 Annual Financial Statements cont. 9. Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value represents the estimated selling price in the ordinary course of business less any costs of completion and costs to be incurred in marketing, selling and distribution. Cost is determined on the following basis: Inventory is valued on invoiced cost. 10. Provisions Provisions are recognised when the SETA has a present obligation as a result of a past event and it is probable that this will result in an outflow of economic benefits that can be estimated reliabily. Long-term provisions are discounted to net present value. There were no provisions accounted for in the annual financial statements. 11. Accruals for employee entitlements Bonus and leave accruals are recognised during the period in which the employee renders the related service. Bonus and leave accruals are recognised when they accrue to employees. An accrual is made for the estimated liability as a result of services rendered by employees up to the reporting date. 12. Financial instruments Recognition Financial assets and financial liabilities are recognised on the SETA s Statement of Financial position when the SETA becomes a party to the contractual provisions of the instrument. All ordinary purchases and sales of financial assets are initially recognised on transaction date. Measurement Financial instruments are initially measured at fair value, which includes transaction costs. Subsequent to initial recognition these instruments are measured as set out below. Financial assets The SETA s principle financial assets are accounts and other receivables and cash and cash equivalents. Accounts and other receivables Accounts and other receivables are stated at amortised costs and reduced by appropriate allowances for estimated irrecoverable amounts which are written off. Cash and cash equivalents Cash and cash equivalents comprises cash on hand, demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and subjected to an insignificant risk of changes in value, these are initially and subsequently recorded at fair value. Financial liabilities The SETA's principal financial liabilities are accounts payables. Financial liabilities are measured initially at fair value but subsequently at amortised cost. 13. Reserves Equity are sub-classified in the Statement of Financial position between the following funds and reserves: Administration reserve Employer grant reserve Discretionary reserve This sub-classification is made based on the restrictions placed on the distribution of monies received in accordance with the Regulations issued in terms of the Skills Development Act, 1998 (Act No. 97 of 1998). 44

16 Member employer company levy payments are set aside in terms of the Skills Development Act and the regulations issued in terms of the Act, for the purpose of: 2010/ /10 % % Administration costs of the SETA Employer Grant Fund Levy Mandatory Workplace Skills Discretionary grants and projects In addition, contributions received from public service employers in the national or provincial spheres of government may be used to pay for its administration costs. Interest and penalties received from SARS are utilised for discretionary grants. Other income received is utilised in accordance with the original source of the income. The net surplus/deficit is allocated to the administration reserve, the mandatory grant reserve and the discretionary fund reserve based on the above. The amount retained in the administration reserve equates to the net book value of property plant and equipment and intangible assets. Excess cash reserves are transfered to the discretionary reserve. Surplus funds in the employer grant reserve are transfered to the discretionary reserve at the end of the financial year. An amount is retained in the employer grant reserve, after consideration is given to new companies, which in terms of the regulations, has six months after joining to submit their work place skills plan. 14. Comparative figures Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. 15. Taxation No provision has been made for taxation, as the SETA is exempt from income tax in terms of Section 10 of the Income Tax Act. 16. Operating Leases Payments made under operating leases are deducted in arriving at net profit/loss on the straight line basis over the period of the lease. 17. Contingencies In terms of the PFMA, all surplus funds as at year-end may be forfeited to National Treasury, should an application for retention of surplus funds be denied. We have on the 31 May 2011 submitted an application to the Department of Higher Education & Training (DHET) for retention of surplus funds. As in the previous year CTFL SETA expects that National Treasury will approve the retention of surplus funds. In terms of the PFMA, all new companies which have registered with SARS in the last six months of the financial year were still able to submit a work place skills plan and receive mandatory grants, this resulted in a contingency liability of R in the mandatory grant reserves on the statement of Financial position. 18. Related Party transactions Transactions are disclosed as other related party transactions where the SETA has in the normal course of its operations, entered into certain transactions with entities either related to the Department of Higher Education & Training (DHET) or which had a nominated representative serving on the SETA accounting authority. Transactions are disclosed as other related party transactions where Inter SETA transactions arise due to the movement of employees from one SETA to another. 45

17 Annual Financial Statements cont. NOTES TO THE ANNUAL FINANCIAL STATEMENTS For the year ended 31 March ALLOCATION OF NET SURPLUS FOR THE YEAR TO RESERVES: 2010/11 Notes Total per Employer Reserve Discretionary Reserve Statement of Administration Mandatory Discretionary Special Total Performance Reserve Grants Grants Projects Discretionary R 000 R 000 R 000 R 000 R 000 R 000 Total revenue Skills development levy: income 2.1 Administration levy income (10%) Grant levy income (70%) Skills development levy: penalties and interest KZN DED & Tourism: Special project W&R SETA joint collaboration project Training layoff scheme UIF Training layoff scheme W&R SETA Investment income Other revenue Total expenses Administration expenses Finance costs KZN DED & Tourism: Special project W&R SETA joint collaboration project Training layoff scheme UIF Training layoff scheme W&R SETA Employer grants and project expenses Net surplus per Statement of Performance allocated (725) /10 Note # Total per Employer Reserve Discretionary Reserve Statement of Administration Mandatory Discretionary Special Total Performance Reserve Grants Grants Projects Discretionary R 000 R 000 R 000 R 000 R 000 R 000 Total revenue Skills development levy: income 2.1 Administration levy income (10%) Grant levy income (70%) Skills development levy: penalties and interest KZN DED & Tourism: Special project W&R SETA joint collaboration project Investment income Other revenue Total expenses Administration expenses Finance costs KZN DED & Tourism: Special project W&R SETA joint collaboration project Employer grants and project expenses Net surplus/(deficit) per Statement of Performance allocated (418) (3) (3) # Approval was granted by the Minister of Higher Education and Training to exceed the 10% administration income due to the decrease in skills levies and the high increase in Audit fees. # 46

18 2010/ /10 R 000 R' NON-EXCHANGE SKILLS DEVELOPMENT LEVY REVENUE AND INTEREST AND PENALTIES 2.1 NON-EXCHANGE SKILLS DEVELOPMENT LEVY REVENUE The total levy revenue, excluding interest and penalties, per the Statement of Performance is as follows: Levy Revenue: Administration Levies received Levies received from SARS Inter SETA transfers in 22 5 Inter SETA transfers out (12) Levies accrued for levies and Inter SETA transfers (41) (99) Levy revenue: Employer Grants Levies received Levies received from SARS Inter SETA transfers in Inter SETA transfers out (62) Levies accrued for levies and Inter SETA transfers (206) (494) Levy revenue: Discretionary Grants Levies received Levies received from SARS Inter SETA transfers in Inter SETA transfers out (19) Levies accrued for levies and Inter SETA transfers (82) (197) NON EXCHANGE SKILLS DEVELOPMENT LEVY REVENUE: PENALTIES AND INTEREST Interest and Penalties Interest and Penalties received INVESTMENT INCOME Interest income Interest income received Accrued Interest OTHER REVENUE Other 385 Duty Credit Certificate (DCC) 383 Saqa holograms

19 Annual Financial Statements cont. Notes 2010/ /10 R 000 R EMPLOYER GRANT AND PROJECT EXPENSES Mandatory grants Disbursed Movement in provisions and accruals Discretionary grants Disbursed Movement in provisions and accruals (3 810) Movement in provisions and accrual ADMINISTRATION EXPENSES Depreciation Amortisation Loss/(profit) on disposal of property, plant and equipment (3) 6 Operating lease rentals (minimum lease payments) Buildings Maintenance, repairs and running costs 3 2 Machinery and equipment Other repairs 3 2 Advertising, marketing and promotions, communication 3 Consultancy and service provider fees Legal fees 4 Cost of employment Travel and subsistence Staff training and development 6.2 (15) Research and development costs Remuneration to members of the audit committee 9 7 External auditor's remuneration Audit fees Specialised Audit fees 66 Bad debts written off Other Workshops and Functions Sundry Computer Expenses Staff workshops 2 27 Electricity Bank Charges Insurance Motor expenses Office Expenses Postages Printing and Publications ETQA Stationery Subscriptions and Memberships Telephone

20 Notes 2010/ /10 R'000 R' Cost of employment Salaries and wages Basic salaries Leave payments/adjustment of accruals 12 (26) Social contributions Medical aid contributions Provident fund contributions: defined contribution plans UIF Insurance Other salary related costs Allocation of cost of employment Administration expenses Average number of employees Staff Training and Development Grants Received from ETDP SETA (2) (34) Staff Training expenditure 2 19 (15) 7. PROPERTY, PLANT AND EQUIPMENT Accumulated Closing Cost depreciation/ Carrying impairment Amount R 000 R 000 R 000 For the year ended 31 March 2011 Computer equipment 309 (307) 2 Office furniture and fittings 297 (272) 25 Office equipment 255 (247) 8 Balance at end of March (826) 35 For the year ended 31 March 2010 Computer equipment 330 (281) 49 Office furniture and fittings 297 (246) 51 Office equipment 261 (230) 31 Balance at end of March (757)

21 Annual Financial Statements cont. Accumulated Marketing Carrying Depreciation Depreciation Discretionary Carrying Amount Amortisation on Depreciation Amount 2011 Additions Disposals charge Disposals exp 2011 Notes R'000 R'000 R'000 R'000 R'000 R 000 R 000 Movement summary 2011 Computer equipment (46) (67) 45 (4) 2 Office furniture and fittings 51 3 (3) (29) 3 25 Office equipment (25) (39) 23 (1) 8 Balance at end of March (74) (135) 71 (5) 35 Accumulated Marketing Carrying Depreciation Depreciation Discretionary Carrying Amount Amortisation on Depreciation Amount 2010 Additions Disposals charge Disposals exp 2010 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Movement summary 2010 Computer equipment (87) (49) 86 (1) 49 Office furniture and fittings (26) 51 Office equipment (81) (26) Balance at end of March (168) (101) 161 (1) INTANGIBLE ASSETS Accumulated Closing carrying Cost amortisation amount For the year ended 31 March 2011 R 000 R 000 R 000 Computer software 16 (16) Software licences 38 (36) 2 54 (52) 2 Accumulated Closing carrying Cost amortisation amount For the year ended 31 March 2010 R 000 R 000 R 000 Computer software 11 (9) 2 Software licences 30 (27) 3 41 (36) 5 Carrying amount Amortisation Carrying amount 2010 Additions charge 2011 Movement summary 2011 R 000 R 000 R 000 R 000 Computer software 2 5 (7) Software licences 3 8 (9) 2 Balance at end of March (16) 2 Carrying amount Amortisation Carrying amount 2009 Additions charge 2010 Movement summary 2010 R 000 R 000 R 000 R 000 Computer software note (3) 2 Software licences (9) 3 Balance at end of March (12) 5 50

22 9. RECEIVABLES FROM NON-EXCHANGE TRANSACTIONS AND EXCHANGE TRANSACTIONS 20010/ /10 Notes R 000 R Receivables from non-exchange transactions Inter SETA debtors Employer receivables overpayments due to SARS Reversals Employer receivables overpayments due to SARS Reversals Employer receivable Overpayment to employers Allowance for doubtful debts (251) (215) Open carrying amount (215) (329) Increase/(decrease) in current year provision (36) 114 Net effect of SARS retrospective adjustments on affected employers R503,000 (2009/10 : R476,000) was recognised as a receivable relating to the overpayment to the employer in earlier periods and is based on the amount of such grant overpayments. 9.2 Receivables from exchange transactions Deposits Interest receivable Prepaid expenses 12 Sanlam/staff training INVENTORIES Opening carrying amount Purchases Amounts utilised (45) (40) Inventory sold Inventories comprises a bulk purchase of photostat paper for office use. 11. CASH AND CASH EQUIVALENTS Cash at bank and in hand Cash at bank Cash on hand 5 5 Cash and cash equivalents at end of year As required in Treasury Regulation 31.2, National Treasury approved the banks where the bank accounts are held. Cash includes cash on hand and cash with banks. Cash equivalents are short term, highly liquid investments that are held with registered banking institutions with maturities of three months or less and that are subject to an insignificant risk of change in value. For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks. 51

23 Annual Financial Statements cont. 12. DEFINED CONTRIBUTION PLAN 2010/ /10 Notes R'000 R'000 Contributions Made CTFL SETA specifies that not more than 10% of the employees' salary package be contributed to Sanlam Investments pertaining to the staffs' provident fund. The employees future benefits depend on the operating efficiency and investment earnings of the fund. Returns of the fund was between 13% and 32% for the current year (2009/10 : 13% 32%) No obligation for any post retirement benefits exists in the future. 13. SURPLUS FUNDS TRANSFERABLE TO NATIONAL TREASURY Open carrying amount Transfers of excess funds from: SDL: Administration reserve SDL: Employer Grant reserve Discretionary reserve Amounts transferred to Administration reserve Application for approval for accumulation (57 323) (48 747) Closing carrying amount 14. TRADE AND OTHER PAYABLES NON-EXCHANGE AND EXCHANGE TRANSACTIONS 14.1 Trade and Other Payables non-exchange transactions Trade and Other Payables non-exchange transactions: Mandatory Grants Trade and Other Payables non-exchange transactions: Discretionary Grants Sars Payable Inter SETA payables Duty Credit Certificate (DCC) Holdings Account Trade and Other Payables exchange transactions Sundry payables Bonus and leave payable Opening Closing balance Additions Balance R 000 R 000 R SARS Payables For the year ended 31 March 2011 Levies incorrectly received For the year ended 31 March 2010 Levies incorrectly received